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Open AccessJournal ArticleDOI

Capital flows to emerging market economies: A brave new world?

Shaghil Ahmed, +1 more
- 01 Jun 2013 - 
- Vol. 48, Iss: 1081, pp 221-248
TLDR
In this paper, the authors examined the determinants of net private capital in emerging market economies and found that growth and interest rate dierentials between EMEs and advanced economies and global risk appetite are statistically and economically important determinants.
About
This article is published in Journal of International Money and Finance.The article was published on 2013-06-01 and is currently open access. It has received 623 citations till now. The article focuses on the topics: Capital control & Interest rate.

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Citations
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How effective are macroprudential policies? An empirical investigation

TL;DR: In this article, the authors construct an index of macro-prudential policies in 57 advanced and emerging economies covering the period from 2000:Q1 to 2013:Q4, with tightenings and easings recorded separately.
Journal ArticleDOI

Monetary Policy Spillovers and the Trilemma in the New Normal: Periphery Country Sensitivity to Core Country Conditions

TL;DR: In this article, the authors investigate why and how the financial conditions of developing and emerging market countries (peripheral countries) can be affected by the movements in the center economies (the U.S., Japan, the Eurozone, and China).
Journal ArticleDOI

U.S. Unconventional Monetary Policy and Transmission to Emerging Market Economies

TL;DR: This paper investigated the effects of U.S. unconventional monetary policies on sovereign yields, foreign exchange rates, and stock prices in emerging market economies and found that these effects depend on country-specific characteristics.
Posted Content

Comparative Assessment of Macroprudential Policies

TL;DR: In this article, a comparative assessment of the effectiveness of macro-prudential policies in 12 Asia-pacific economies, using comprehensive databases of domestic macro-priential policies and capital flow management (CFM) policies is provided.
Posted Content

U.S. Unconventional Monetary Policy and Transmission to Emerging Market Economies

TL;DR: The authors investigated the effects of U.S. unconventional monetary policies on sovereign yields, foreign exchange rates, and stock prices in emerging market economies and found that these effects depend on country-specifc characteristics.
References
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ReportDOI

Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence

TL;DR: In this paper, the authors argue that the global financial cycle is not aligned with countries' specific macroeconomic conditions and propose a convex combination of targeted capital control, macroprudential control, and stricter limit on leverage for all financial intermediaries.
Journal ArticleDOI

Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops

TL;DR: In this article, the authors studied mechanisms through which a sudden stop in international credit flows may bring about financial and balance of payments crises, and they argued that the greater independence that countries have, as compared to regions of a given country, could help explain why sudden stop crises are more prevalent and destructive at international than at national levels.
Journal ArticleDOI

The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy

TL;DR: In this paper, the effect of the Federal Reserve's purchase of long-term Treasuries and other longterm bonds (QE1 in 2008-09 and QE2 in 2010-11) on interest rates was evaluated using an event-study methodology.
Journal ArticleDOI

Capital Flow Waves: Surges, Stops, Flights and Retranchment

TL;DR: This article analyzed the drivers of international waves in capital flows and found that global factors, especially global risk, are the most important determinants of these episodes, while domestic macroeconomic characteristics are generally less important, although changes in domestic economic growth influence episodes caused by foreigners.
Journal ArticleDOI

Inflows of capital to developing countries in the 1990s

TL;DR: The recent surge in capital inflows was initially attributed to domestic developments, such as sound policies and stronger economic performance of a handful of countries, but it became clear that the phenomenon was widespread, affecting countries with very diverse characteristics as discussed by the authors.
Related Papers (5)
Frequently Asked Questions (11)
Q1. What is the meaning of free movement of capital across national borders?

According to economic theory, free movement of capital across national borders is bene cial to all countries, as it leads to an e¢ cient allocation of resources that raises productivity and economic growth everywhere. 

In both the pre-crisis and post-crisis period, the main determinants of total net in ows (columns 1-4) are the growth di¤erentials and policy rate di¤erentials, whereas risk aversion does not come in statistically signi cant. 

in their benchmark results the authors focus their analysis on emerging Asian and Latin American economies, excluding Hong Kong and Singapore. 

EMEs have also used more macroprudential measures in recent years to strengthen their nancial systems and target speci c sectors, such as property markets, that may be especially susceptible to asset bubbles. 

For the FE model, which was used in gure 10, while a percentage point increase in the policy rate di¤erential in the pre-crisis period would enhance net total in ows by a negligible amount, in the post-crisis period, the e¤ect would be 0.7 percent of GDP. 

For the portfolio ows model, the sensitivity to policy rate di¤erentials increases statistically signi cantly in the post-crisis period (column 4), again from a negligible e¤ect in the pre-crisis period to a 0.6 percent of GDP e¤ect in the post-crisis period. 

The usual interpretation seems to be that "push" brings in the problematic kind of ows, while "pull" brings in the acceptable kind. 

the IOF on foreign investment in equities and certain types of corporate bonds was eliminated in December 2011 (which is assigned to 2012:Q1), but subsequently the IOF on external borrowing by banks and rms was extended twice in 2012:Q2 to cover longer tenors. 

If the authors apply the pre-crisis model to the post-crisis behavior of the determining variables, the model somewhat underpredicts total net capital in ows, but vastly underpredicts portfolio net in ows. 

In addition, measures that are not speci cally aimed at foreign investors may still restrict the in ows indirectly, such as the restrictions applying to domestic borrowers rather than to foreign lenders, and therefore are included in their database. 

But it could be argued that if news about imposition of controls is leaked in advance, investors may choose to bring in capital in advance of the imposition of controls, and subsequently ows might be seen to slow.